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Euro \ dollar: Last week results and forecast for the upcoming period.
The pair euro / dollar rose last week to the level of 1.1170. The US currency was losing value due to weak economic data in the US and the growing interest in risky assets. As a result, quotes overcame the local resistance level of 1.1070 and reached their maximum value since August.
The main fundamental factor in the strengthening of the single currency was the reduction of Brexit risk without a deal. The agreement between the UK and the European Union reduces the risks to the economy of the Eurozone. On Saturday, the British parliament voted in favor of adopting additional laws, and then return to discussing an agreement with the EU. This may limit further growth of the euro and lead to a decrease in quotations to the support level of 1.1100.
This week there will be a meeting of the European Central Bank. This will be the last meeting for President Mario Draghi, but is unlikely to significantly change the mood in the markets. The European regulator outlined its monetary policy plans last month. The new ECB chief Christine Lagarde will adhere to the current strategy and may advocate further mitigation. Market participants are not sure that the new package of incentive measures of the European Central Bank will return inflation to the target and expect an increase in the risk of recession in the region in the next two years.
Following the September meeting, the ECB announced the resumption of the purchase of assets for an indefinite period and lowered the deposit rate to support the economy of the Eurozone. Against the decision to reanimate the quantitative easing program, more than a third of the members of the ECB's governing council spoke. They questioned its effectiveness. Markets suggest that new measures will not be able to return inflation to the ECB target of about 2%.
Growth in consumer prices in the Eurozone in September fell to its lowest level since 2016 and is unlikely to accelerate in the near future. According to analysts, the average inflation rate will be 1.2% - this is the minimum since the beginning of the measurement of this indicator. The forecast for consumer inflation for the next year also implies an increase of 1.2%. To change the current situation, according to the economists surveyed, it will be necessary to engage in fiscal policy, support investments and cause the strengthening of economic activity, which will ultimately lead to higher inflation. In the meantime, the likelihood of a recession in the Eurozone over the next 12 months has grown to 30% from 25% in September and peaked since July 2018. The likelihood of a recession in two years rose to 35%.
The next key resistance for the euro / dollar is located at the two-day moving average line 1.1240. Quotes can test this mark at the beginning of a new week. The further dynamics of the pair will largely depend on the progress on the Brexit deal.
In our forecast for the coming week, we assume further growth of the euro / dollar to resistance levels 1.1190, 1.1220, 1.1240, 1.1270 and 1.1300.
Economic statistics next week.
In macroeconomic statistics coming out next week, the following indicators can be distinguished:
Japan publishes import, export data and general trade balance. In China, the housing price index will be released and the decision of the People's Bank on the interest rate will become known.
In the UK will publish the housing price index Rightmove. In Germany there will be a producer price index and a monthly report of the Bundesbank. Bank of England's Monetary Policy Committee spokesman Andy Haldane will make a statement.
In the Eurozone will publish a study of bank lending in the region. In the UK, there will be data on net public sector borrowing and a report by the British Confederation of Industrialists on changes in the volume of orders.
In Canada, retail sales data will be made available and an overview of the economic situation of the Central Bank will be released. In the United States will publish the Redbook retail sales index, sales in the secondary housing market and an indicator of business activity in the manufacturing sector of the Federal Reserve Bank of Richmond. The American Petroleum Institute announces changes in stocks last week.
New Zealand will publish data on imports, exports and total trade balance. Deputy Head of the Reserve Bank of Australia Christopher Kent will give a speech.
In the UK, data on approved mortgage loans will become known, and in Germany ten-year government bonds will be placed. In the Eurozone will publish the level of consumer confidence.
In the US, there will be an index of housing prices and an indicator of mortgage lending MBA. In Canada, retail sales data will become known. Energy Information Management will post changes in commercial oil inventories in the US last week.
Australia will publish PMI in the manufacturing and services sectors. In Japan, indices of coincident and leading indicators and the PMI indicator in the manufacturing sector will be released.
In Sweden, the Central Bank's decision on interest rates will become known. In France, Germany and the Eurozone will publish indexes of business activity in the manufacturing sector and in the service sector. The ECB will host a meeting in the Eurozone, the regulator’s decision on the interest rate will become known, and the regulator’s press conference will be held.
The United States will publish the number of initial and repeated applications for unemployment benefits, the volume of orders for durable goods, an index of activity in the services sector, an indicator of industrial activity by the Federal Reserve Bank of Kansas and data on sales of new homes. Energy Information Management will present changes in natural gas reserves.
In Japan, there will be data on foreign and national investment in securities.
In Germany, they will publish the consumer confidence index from Gfk, the business optimism index, the current situation indicator from the IFO and the indicator of economic expectations. In Sweden, retail sales data will become known.
University of Michigan Consumer Confidence Released. Baker Hughes will report on active rigs over the past week.